96-036
Response
February 23, 1996
Request
Dear
XXXXX,
Because
revenue currently generated by XXXXX within the state of Utah might qualify for
a sales tax exempt status, we are requesting a Sales Tax Ruling on the
taxability of our products and services.
In general, XXXXX is a manufacturer and distributor of medical products. We manufacture in California, however, we do
engage in the business of selling and renting our orthopedic care products in
Utah. Based on Tax Bulletin 95
enclosed, home medical equipment is exempt from sales tax. Please consider the enclosed information
when you determine your ruling on the taxability of the following XXXXX
products:
1.
XXXXX (Patient Kits)
XXXXX
designs and manufactures XXXXX devices for the upper and lower
extremities. Each is specially designed
for use in a specific rehabilitation setting.
The upper extremities have two major devices:
1)
XXXXX: Anatomically correct hand XXXXX, designed to prevent joint stiffness and
allow for a controlled rehab program (Exhibit 1).
2)
XXXXX: Shoulder XXXXX and patient positioning system with various support
adjustments to ensure proper anatomic alignment (Exhibit 1).
The
lower extremities have the following three major devices (Exhibit 2
& 3):
These
lower extremity systems have been designed to move the leg in an anatomically
correct manner. These devices are sold
or rented upon prescription by a registered physician to both individual
patients and hospitals.
1)
XXXXX: has been designed with a wide base and antiskid rubber mat to hold the
device safely on the patient's bed.
Deep cradles accommodate patients comfortably.
2)
XXXXX: is our newest unit in the line of XXXXX's. This unit is designed to specifically meet the physician and the
patient's sports medicine goals by obtaining the fullest range of motion as
soon as possible, preventing the long term complications and a quick return to
activities.
3)
XXXXX: is designed specifically for hospital use. The device attaches to traction bars, or a portable cart, at the
foot of the bed and rests laterally to the patient's leg.
The
devices are placed on the patient at the time of rental, by a qualified trained
technician who adjusts the device to meet the requirements of the
prescription. All devices consist of a
support and an electronic box, which controls the movement.
XXXXX
Kits: The disposable pads used with our XXXXX devices are made from vinyl and
kodel and are not reused. The patient
kit is designed to provide comfort for the patient while maintaining proper
anatomical alignment. XXXXX designed
and maintains specifications for patient kits to be used exclusively on each
XXXXX model XXXXX device.
2.
Braces
XXXXX
manufacturers its own functional brace called the XXXXX (Exhibit
4). It is a custom fitted functional
brace which incorporates significant design features which prevents the knee
from exceeding its limits of range of motion.
The unique hinge design accommodates for changes in the length of the
leg by mimicking the biomechanics of the knee as it goes through flexion and extension,
thus reducing brace migration.
XXXXX
also distributes another custom functional brace known as the XXXXX
(Exhibit 4). This brace also prevents
the knee from exceeding its limits of range of motion. It comes with adjustable pads for the knee
and an anti-migration system which prevents the brace from slipping.
XXXXX
also distributes other braces (Exhibit 5) that are used to protect a body part
after an injury or surgery. These
braces are also used before the rehabilitation process and after swelling has
decreased. Braces are distributed for
the knee, ankle and wrist.
3.
XXXXX (Exhibit 6)
XXXXX
is the therapeutic use of cold to reduce pain, swelling, and decrease the
length of hospital stay. XXXXX
distributes six types of XXXXX. These
are XXXXX. Applications include
post-operative use, immediately following injury or trauma, before and after
physical therapy sessions. These
devices may be sold or rented upon prescription by a registered physician to
both individual patients and hospitals.
4.
XXXXX (Exhibit 7 & 8)
XXXXX
can be used to increase or maintain range of motion (ROM), preventing atrophy,
reeducating muscles and healing wounds.
XXXXX electrotherapy has four types XXXXX. These devices are sold or rented upon prescription by a
registered physician to individual patients, physical therapists and hospitals.
5.
XXXXX (Exhibit 9)
XXXXX
are used for treatment of joint stiffness resulting from trauma or
immobilization. These orthoses may be
used on upper and lower extremities and are available in two or three sizes,
depending on the orthosis that is being used.
The knee and elbow orthoses can facilitate both flexion and
extension. However, with the wrist
XXXXX, you must specify if you need a flexion or extension XXXXX. This will be determined upon examination of
the patient's needs. These devices are
sold or rented upon prescription by a registered physician to both individual
patients and hospitals.
6.
XXXXX(Exhibit 10)
The
XXXXX system that fills a three chamber garment distal to proximal. This unit is used to therapeutically manage
swelling of the lymph nodes and extremities medically know as “lymphedema and
edema”.
The
XXXXX is an intermittent pneumatic compression device used for the prevention
of blood clots medically know as Deep Vein Thrombosis (DVT).
Both
of these devices are sold or rented upon prescription by a registered physician
to the individual patient, physical therapist and hospitals.
7.
XXXXX and Supports (Exhibit 11)
XXXXX
is designed for supporting ankle, knee, thigh, wrist, elbow, waist, and back. Supports are designed to maintain a body
part in condition during daily activities after an injury by acting as a
foundation or prop. These devices are
sold upon prescription by a registered physician to both individual patients
and hospitals.
8.
Arm Immobilizers (Exhibit 12)
Promotes
healing of an injured body part by keeping it immobilized.
9.
Splints (Exhibit 13)
Splints
protect against further injury and pain by immobilizing the injured body part.
10.
Orthopaedic Walkers (Exhibit 14)
Orthopaedic
walkers are designed to stabilize and maintain the ankle from further injury
after a sprain or a fracture.
11.
Durable Equipment
XXXXX's
durable equipment includes crutches, canes, walkers, and wheelchairs. XXXXX distributes durable equipment to aid
in the rehabilitation process of the patient.
12.
CarePlan
XXXXX's
CarePlan consolidates all elements of the physicians rehab protocol into a
single, cost- effective program.
CarePlan provides a wide range of resources needed to optimize patient
outcomes for one cost. The following
four CarePlans are provided and sold as one package.
XXXXX
13.
Repair Items
Occasionally,
XXXXX devices we manufactured are sent back to us in California for
repair. We repair them here and ship
back to the user.
XXXXX
is requesting a Sales Tax Ruling on the tax status on all thirteen of our major
products underlined and bolded above.
These devices are fitted surgical apparatus which activate or supplement
a weakened or atrophied limb or function until recovery from surgery. The XXXXX device has proven to go beyond the
scope of activation but also aid in the healing process. Our devices are becoming an integral part of
the surgical protocol.
Besides,
please let us know if it is exempt sale or rental through Medicare/Medicaid
program or workers' Compensation.
If
any additional information or clarification is needed or desired, please
contact me.
Thank
you for your consideration.
Sincerely,
XXXXX
XXXXX
RE:
Advisory Opinion Sales tax exemption on medical equipment.
Dear
XXXXX,
We
have received your request for an opinion regarding the application of sales
tax to medical devices manufactured by your company. Although vou asked that we identify the taxable status of each
item on your list, we cannot do so. To
qualify for exemption, the purchase must meet the criteria stated in Tax
Bulletin 95, and it must be eligible for payment under Medicare or state
Medicaid guidelines. With regard to
Medicare and Medicaid eligibility, we find ourselves in the position of relying
on outside experts to help us make that determination. In our short experience with Medicare and
Medicaid guidelines, we have learned that eligibility often depends upon the
individual circumstances of the person for whom the equipment is prescribed.
The
best advice that we can offer is this: if you sell or rent your equipment
directly to a Utah patient who seem to meet the qualifications stated in Tax
Bulletin 95, contact us for assistance in determining whether the equipment
qualifies under Medicare or Medicaid.
Alternatively. we suggest that you collect and remit sales tax on the
sale or rental and direct the patient to contact us for assistance in obtaining
a refund if one is due.
It
may interest you to know that the State Legislature is considering amendments
to this exemption. The amendments are
intended to remove extraneous language from the statutes and to make clear that
eyeglasses and hearing aids are not eligible for the exemption. If the amendment passes, it probably will
not impact the exemption as it relates to your company's medical devices.
For
the Commission,
Alice
Shearer
Commissioner